Note 3. Variable Interest Entity

Ronco Holdings, Inc. is a distributor of consumer products which the Company believes could add significantly to its product lines and distribution channels.

On March 6, 2014, under the terms of the Amended and Restated RFL Enterprises and Infusion Agreement ("Participation Agreement"), IBI agreed to the acquisition of all rights with respect to secured debts held by creditors of Ronco, subject to an initial payment of $2,000,000 and a final payment of $2,350,000 within one year. The initial payment was made in March 2014 and on April 2, 2014, concurrent with execution of the merger agreement between the Company and Infusion (Note 4), Infusion assumed all assets and obligations of IBI, including all rights held by IBI under the Participation Agreement. These rights included the ability to designate a majority of the members of Ronco's board of directors, which became effective in March 2014 upon the initial $2,000,000 payment. The composition of management was the same for both IBI and Infusion on March 6, 2014. The power to direct the activities that most significantly impacted Ronco's economic performance was determined to have occurred when the Participation Agreement was signed on March 6, 2014 with Infusion being deemed the primary beneficiary on that date.

A VIE is an entity that either (i) has insufficient equity to permit the entity to finance its activities without additional subordinated financial support or (ii) has equity investors who lack the characteristics of a controlling financial interest. A VIE is consolidated by its primary beneficiary. The primary beneficiary has both the power to direct the activities that most significantly impact the entity's economic performance and the obligation to absorb losses or the right to receive benefits from the entity that could potentially be significant to the VIE. Management has concluded, as a result of the Participation Agreement, that Infusion is the primary beneficiary of Ronco as Infusion has the power to direct the activities of Ronco that most significantly impact its economic performance. Therefore, Ronco was consolidated effective March 6, 2014. Infusion's initial consolidation of Ronco is accounted for as a business combination which requires that the assets and liabilities be recorded at fair value. This conclusion will be re-evaluated during subsequent reporting periods if the relationship between Infusion and Ronco changes.

The liabilities of Ronco consolidated by the Company do not represent additional claims on the Company's general assets; rather, they represent claims against the specific assets of Ronco. Similarly, the assets of Ronco consolidated by the Company do not represent additional assets available to satisfy claims against the Company's general assets. The creditors of Ronco do not have recourse to the Company, thereby limiting our liability risks associated with our variable interests in Ronco.

A summary of Ronco assets and liabilities included in the Company's condensed consolidated financial statements at June 30, 2014, is as follows:


Assets
Current assets:
Cash	$	15,889
Accounts receivable, net		1,497,513
Accounts receivable - related party		342,871
Inventories		1,657,820
Prepaid expenses and other assets		229,468
Total current assets		3,743,561

Property and equipment, net		261,355
Goodwill		15,907,825
Intangible assets, net		3,635,426
Total assets	$	23,548,167

Liabilities and Redeemable Preferred Stock
Current liabilities:
Accounts payable	$	2,159,648
Accrued expenses		2,882,220
Notes payable		11,620,143
Total current liabilities		16,662,011

Long-term notes payable - related party		3,585,591
Total liabilities	$	20,247,602

Redeemable preferred stock	$	2,700,000

The condensed consolidated results of operations for the three and six month periods ended June 30, 2014, include revenues attributable to Ronco of approximately $1,671,000 and $2,285,000, respectively, and a net loss attributable to Ronco of approximately $1,016,000 and $1,142,000, respectively.